I has just finished reading The Case for a Carbon Tax: Getting Past our Hang-ups to Effective Climate Policy by Shi-Ling Hsu.The author was a professor at the UBC Faculty of Law when he wrote the book. He presently is a professor at Florida State University.
In the book, Dr. Hsu compares four different mechanisms to reduce the amount of carbon dioxide our civilization is putting into the atmosphere and concludes that a carbon tax is best.
Command and control means setting some maximum amount of pollution that a factory or some other polluter can produce. Any amount above that maximum is penalized. These maximums are generally somewhat arbitrarily based on the abatement technology available at the time. Once in place there is no incentive reduce emissions below the maximum. Compliance involves constant monitoring and litigation.
Although there are variations, cap and trade is in some ways similar to command and control in that maximum amounts of pollution are set for each polluter. Those that produce less than their maximum can then trade that amount to polluters who are above their maximum.
Theoretically, cap and trade works well. In reality, however, experience has shown that it's too easy to cheat. Hsu gives as an example refrigerant plants in China that make more money through carbon credits than they do from the actual product they sell.
The Kyoto Protocol is based largely on cap and trade, which is one reason why it has not been working.
Government subsidies are a third option. One problem with this approach is it requires politicians and bureaucrats to pick winners and losers, rather than the marketplace. Government is better at reducing “bads” than it is at increasing “goods”, Hsu observes.
The fourth mechanism, a carbon tax, is simple to implement because fossil fuels – coal, natural gas and oil – are easy to track and measure. Implementing a carbon tax on gasoline in British Columbia, for example, was a trivial problem because federal and provincial taxes were already collected at the fuel pump.
A carbon tax directly rewards and punishes the behaviours we want to encourage and discourage – if you are frugal with fossil fuels you pay less, if you are wasteful, you pay more.
The biggest problem with implementing a carbon tax seems to be that it is a tax, Hsu says, and no one wants to pay another tax.
Another criticism has been that it is regressive – that it taxes the poor more heavily than the rich. Real-life studies have found this is not the case, says Hsu. The very poor, those living on the streets, use little or no fossil fuels directly. They also have alternatives they can use. The very wealthy, on the other hand, have multiple vehicles, yachts, several homes around the world, and private jets. Many of the very wealthy have investments in fossil fuel companies, and so would pay carbon taxes that way.
I put a petition calling for a global carbon tax on Care2 in July. Recently, Roz Savage, a woman who rowed across the Atlantic and Pacific oceans to call for an end to global warming, put her name on it (she doesn't appear to be afraid of anything). If you want to check it out, the address is www.thepetitionsite.com/286/384/042/petition-for-a-referendum-on-a-global-carbon-tax/ .